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US Home Prices Are Climbing Faster Than the Mortgage Bubble 15 Years Ago

According to a recent study published by Equipment Radar, U.S. home prices have surpassed the 2005-2006 housing bubble, which was followed by the infamous 2007-2010 subprime mortgage crisis. However, the research finds that the current housing market rise is not driven by creative financing and speculative lending, as it is more about the inflated prices of building products and supply and demand factors.

Amid the Pandemic and the Highest Unemployment Levels in Decades, the US Housing Market Is Booming

After the calamity of Covid-19, the massive unemployment numbers and the overall U.S. economic outlook, it’s likely nobody expected the American housing market to spike so significantly. Although, if one was to research and follow the money trail, one would notice that the U.S. monetary supply has spiked more in the last 18 months than ever before in American history.

At the end of March, analysts and economists were predicting that the U.S. housing market would crash to 29-year lows, but that was before the massive quantitative easing (QE) kicked in. Even Freddie Mac warned of housing market uncertainty back in April when home builder sentiment dropped 58% that month. Critics blasted the Fed about the situation back in March, as home prices across the U.S. jumped over 11% across the board.

US Home Prices Are Climbing Faster Than the Mortgage Bubble 15 Years Ago

All those speculations fizzled out months later and people started noticing that homebuyers were facing stiff competition. People started to notice that home buying in the U.S. was being driven by the Federal Reserve’s mortgage-backed securities (MBS) operations and Wall Street investors. In mid-June, more statistics had shown that megabanks are participating in the U.S. housing market fray.

That month countless reports from the Wall Street Journal, Propertyreporter, New York Post, Atlantic, American Economic Liberties Project, Barron’s, and other investigations show these banks want to be “your new landlord.”

Equipment Radar Study Indicates US Housing Boom Stems from Supply & Demand, Building Supply Inflation

Now a study from Equipment Radar shows that U.S. home prices have surpassed the 2005-2006 housing bubble, but this cycle has been different than that specific housing bubble.

“U.S. home prices have risen rapidly over the past 12 months due to a variety of factors including low-interest rates, shortage of available housing, and a robust economy following pandemic-related fiscal stimulus,” explains the Equipment Radar report.

“The Case-Shiller Home Price Index rose 17% year over year in May 2021, surpassing the prior 2005/06 housing market boom peak of 15% in September 2005. Nationwide home prices are now 38% above the prior peak,” the report adds.

US Home Prices Are Climbing Faster Than the Mortgage Bubble 15 Years Ago

Equipment Radar researchers detail that instead of creative financing and speculative lending, there is a lack of supply. The report notes that Altos Research says “U.S. inventory of homes for sale is ~50% below normal levels as of August 2021.” Another factor affecting home prices is the cost of building supplies and lumber.

“Input costs are rising and inflation is back – this is no secret if you visit a grocery or hardware store on a regular basis. Companies are seeing their input prices increase too, and for many it is a much greater degree,” Equipment Radar’s report says.

Equipment Radar: ‘Checks in the Mail From Governments Will Likely Be Utilized Again if Slowdown Appears’

The report concludes that the recent home gains could be “stickier than the 2005/2006 cycle due to higher building costs and low inventory of homes available for sale.” Equipment Radar notes that it’s possible home prices could slow down and the report also stresses that if an economic slowdown happens again, stimulus will likely be leveraged.

“Home prices could take a ‘breather’ and flatten out for some time – it seems that a drop similar to 2005/06 is less likely,” the report concludes. “[Lastly], the post-pandemic world has changed – generous fiscal stimulus (checks in the mail from governments) will likely be utilized again at the first signs of any major slowdown,” the researchers added.

What do you think about Equipment Radar’s report on rising house prices in the U.S.? Let us know what you think about this subject in the comments section below.

Tags in this story
bubble, Building Supplies, economics, Equipment Radar, Equipment Radar report, Fed, Fed Mortgages, Federal Reserve, home buying, homebuyers, Inflated, inflation, Lumber Costs, MBS, mortgage-backed securities, QE, Real estate, Real Estate Bubble, real estate market, retail properties, stimulus, US Real estate, Wall Street

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